Deal reached to privatize the Pa. Lottery

HARRISBURG, Pa. — The Corbett administration announced late Friday that it would award to a British firm a contract to privatize the management of the Pennsylvania Lottery.

The announcement came just days before a state Senate committee was scheduled to hold a hearing on what has become the administration's most aggressive foray into privatizing state services.

While the contract with Camelot Global Services was not yet formally signed, the administration issued what it called a "notice of award." Though not a binding agreement, it puts Pennsylvania squarely on course to become the third state, behind Indiana and Illinois, to hire a private lottery manager.

Under the proposal, Camelot would guarantee profits totaling $34 billion over the life of the 20-year contract.

A formal contract signature could come within a week. In the meantime, lottery employees were informed Friday afternoon of Gov. Corbett's intent to award the contract to Camelot, which runs Britain's national lottery.

For months, Corbett has been working behind the scenes to bring in a company to manage the lottery, which last fiscal year recorded more than $3.5 billion in sales and more than $1 billion in profit that went toward programs that benefit senior citizens. The administration has argued that a rapidly growing senior population in Pennsylvania has made it necessary to explore ways to make the lottery more profitable.

On the political front, the lottery-privatization push has come to be viewed as a test of the administration's negotiating mettle. The thinking was that if Corbett could seal the deal, it would instill confidence in his ability to privatize other services, a key campaign promise.

The administration's late-in-the-day decision was swiftly criticized by some legislators, who had planned on holding a hearing Monday on privatizing the lottery's management. Democrats in particular called it a shameful end run, maintaining it flew in the face of the administration's promises of transparency.

"To have this action take place right before a hearing... shows real contempt, not just for the legislature but for the public," Sen. Rob Teplitz (D., Dauphin) said Friday, minutes after word leaked that Corbett was going through with the deal.

Dave Fillman, executive director of AFSCME Council 13, which represents about 170 unionized lottery workers, called it "a bad deal" for state employees and Pennsylvania seniors, "especially when most of the nation is talking about trying to stop the outsourcing of jobs. Now, 170 of my members could likely lose their jobs to a foreign corporation."

Even some Republicans said they were disappointed in the decision to push forward before legislators had a chance to hold a hearing and get answers to lingering questions about the deal.

"It's a bit of an affront," said Drew Crompton, counsel and chief of staff to Senate President Pro Tempore Joe Scarnati (R., Jefferson), who at times has been at odds with Corbett. "The bottom line is, there is no harm in public vetting. People talk about transparency, and this would have been the perfect opportunity for transparency. It's not like they didn't know the hearing was coming."

Jay Pagni, spokesman for the governor's budget office, said issuing the notice of the award actually encouraged transparency - by freeing up administration officials during Monday's hearing before the Senate Finance Committee to disclose details of the deal that they would not have otherwise been able to discuss because of procurement rules.

"The issuance of a 'notice of award' officially ends any type of confidentiality or nondisclosure agreements, and will allow the commonwealth to provide specific details and answer questions posed by the committee," Pagni said.

As for Camelot, the company said in a statement Friday that it intended to keep "as many current lottery employees as possible" and to increase the number of employees in Pennsylvania overall.

"We know the state has placed enormous trust in giving us responsibility for its lottery, and we intend to work tirelessly to earn that trust," the statement said. "We are confident in our projections on growing responsibly the Pennsylvania Lottery over the next 20 years and guaranteeing the economic future for seniors programs."

Notwithstanding Friday's decision to award Camelot the contract, privatizing the management still faces some obstacles.

AFSCME has sued to block the contract, arguing that Corbett lacks authority to privatize the lottery without legislative approval. Seven Democratic legislators have challenged the deal in court as well. The union has also filed a grievance, along with an unfair-labor-practice charge, before the state's labor relations board.

Then there is Treasurer Rob McCord. The Democrat has threatened to withhold payments to Camelot because, during the negotiations, the administration said it expected Camelot's profit to be boosted by introducing keno terminals in bars and restaurants - a move that some see as an expansion of legalized gambling that would require legislative approval.

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let me get this straight they are going to have a British company privatizing and handling an American lottery. well i am sure glad i do not live in pennsylvania. i bet the british company does not even know anything about how american state lotteries are run. i see the british messing it up some how. i can also see how the company is going to want millions of dollars from the sale of lottery tickets. i say leave it to the americans.